View source for Bank Nationalisation Case

{{Short description|Judgment of the High Court of Australia}}
{{Use Australian English|date=November 2017}}
{{Use dmy dates|date=November 2017}}
{{Infobox court case
| name = Bank of New South Wales v Commonwealth{{Refn|Full case name of the five actions of the case: ''Bank of New South Wales and others and The Commonwealth and others''; ''Bank of Australasia and others and The Commonwealth and others''; ''State of Victoria and another and The Commonwealth and others''; ''State of South Australia and another and The Commonwealth and others''; ''State of Western Australia and another and The Commonwealth and others''.}}
| court = [[High Court of Australia]]
| image = Coat of Arms of Australia.svg
| date decided = {{start date|df=y|1948|08|11}}
| citations = {{cite AustLII|HCA|7|1948|parallelcite=[http://www.austlii.edu.au/au/cases/cth/HCA/1948/7.pdf (1948)&nbsp;76&nbsp;{{abbr|CLR|Commonwealth Law Reports}}&nbsp;1]}}
| judges = {{Plainlist|
* Chief Justice [[John Latham (judge)|John Latham]]
* Justice [[George Rich]]
* Justice [[Hayden Starke]]
* Justice [[Owen Dixon]]
* Justice [[Edward McTiernan]]
* Justice [[Dudley Williams (judge)|Dudley Williams]] 
}}
| number of judges = 6
| appealed to = [[Judicial Committee of the Privy Council|Privy Council]] ([[#Privy Council decision|''see below'']])
| opinions = The ''Banking Act 1947'' was beyond the power of the [[Commonwealth Parliament]] as:
* it involved compulsory acquisition that was not "on just terms", as required under [[Section 51(xxxi) of the Australian Constitution|section 51(xxxi) of the Constitution]] (per each member of the Court)
* it violated the requirement that trade and commerce "shall be absolutely free", as required under [[Section 92 of the Constitution of Australia|section 92 of the Constitution]], which is to be understood as a right of persons to trade freely inter-state (per Rich, Starke, Dixon and Williams)<ref>{{Cite book |last=Johnston |first=Peter |title=Australian Constitutional Landmarks |date=2003 |publisher=[[Cambridge University Press]]|isbn=978-0-521-83158-1 |editor-last=Lee |editor-first=H P |location=Cambridge; New York |pages=95–6 |language=en |chapter=The Bank Nationalisation Cases: The Defeat of Labor’s Most Controversial Economic Initiative |editor-last2=Winterton |editor-first2=George}}</ref>
}}

The '''''Bank Nationalisation Case''''', also called '''''Bank of New South Wales v Commonwealth''''' (1948) 76 [[Commonwealth Law Reports|CLR]] 1, is a 1948 decision of the [[High Court of Australia]] (upheld [[#Privy Council decision|on appeal to the Privy Council]]) that invalidated [[Chifley government]] legislation that attempted to [[nationalise]] the [[Private sector|private]] banking sector. Separate majorities held that the legislation breached three different provisions of the [[Constitution of Australia|Constitution]]: [[Section 92 of the Constitution of Australia|section 92]] (requiring trade and commerce between the states to be "absolutely free"), [[Section 51(xxxi) of the Australian Constitution|section 51(xxxi)]] (requiring compulsory acquisition of property to be "on just terms") and [[Section 75 of the Constitution of Australia|section 75(iii)]] (which grants the High Court original jurisdiction in cases where the Commonwealth is sued).

A subsequent appeal application by the Commonwealth to the [[Judicial Committee of the Privy Council|Privy Council]] was dismissed on jurisdictional grounds. The Board held that the case involved potential questions around the limits of the powers between the Commonwealth and the states and hence they were precluded from hearing the case under [[Section 74 of the Constitution of Australia|section 74 of the Constitution]]. However, the Board did affirm that the legislation breached section 92 of the Constitution, thus endorsing the individual right interpretation of the section. Additionally, the Board formulated its own test for when section 92 would be breached. This test was adopted and applied by the High Court until 1988, where in the case of ''[[Cole v Whitfield]]'' the section was reinterpreted as a prohibition on protectionist legislation.

The case rendered a key pillar of [[Australian Labor Party|Labor]]'s economic policy unworkable and possibly was influential in the [[1949 Australian federal election|eventual defeat of the government in 1949]]. Labor remained in opposition for 23 years and with nationalisation no longer an option, the party moved towards less direct methods to achieve its social and economic goals. The use of tied grants to the states ([[Section 65 of the Constitution of Australia|section 65]]) and the external affairs power ([[Section 51(xxix) of the Constitution of Australia|section 51(xxix)]]) were later utilised by governments, beginning with the [[Whitlam government]] in 1972.

==Background==
Comfortable in government after two strong election wins, the [[Australian Labor Party|Labor]] government of [[Ben Chifley]] announced in 1947 its intention to [[Nationalization|nationalise]] private banks in Australia. To accomplish this goal the Parliament passed the ''[[Banking Act 1947]]''.<ref>{{cite Legislation AU|Cth|num_act|ba194757o1947118|Banking Act 1947}}.</ref> Under the Act, shares in the private banks would be owned by the [[Commonwealth Bank]], which in turn would be owned by the [[Government of Australia#Federal Government|Federal Government]].<ref>{{cite hansard |jurisdiction=Commonwealth of Australia |house=House of Representatives |date=15 October 1947 |pages=804–5, 808 |speaker=Ben Chifley |position=Prime Minister |url=http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22hansard80%2Fhansardr80%2F1947-10-15%2F0093%22 |title=Banking Bill 1947: Second Reading}}.</ref> The proposal was controversial, and the [[Constitutionality|constitutional validity]] of the law was challenged by a number of banks, including the [[Bank of New South Wales]], as well as the non-[[Australian Labor Party|Labor]] states of [[Victoria, Australia|Victoria]], [[South Australia]] and [[Western Australia]].<ref name="Hull_centenary"/> The banks were represented by a formidable legal team,<ref name="Hull_centenary"/> with the Australian incorporated banks represented by [[Garfield Barwick]] {{post-nominals|country=AUS|KC}},<ref name="76 CLR 1">{{cite AustLII|HCA|7|1948|litigants=Bank of New South Wales v Commonwealth|parallelcite=[http://www.austlii.edu.au/au/cases/cth/HCA/1948/7.pdf (1948) 76 {{abbr|CLR|Commonwealth Law Reports}} 1]|courtname=auto|date=11 August 1948}}.</ref>{{rp|at p. 7}} who would later become the Chief Justice, and the United Kingdom incorporated banks represented by [[Frank Kitto]] {{post-nominals|country=AUS|KC}},<ref name="76 CLR 1"/>{{rp|at p. 37}} who would later be appointed to the High Court, while the Commonwealth was represented by the former High Court judge [[Herbert Evatt]] {{post-nominals|country=AUS|KC}}.<ref name="76 CLR 1"/>{{rp|at p. 49}}

==High Court decision==
The Court hearing lasted for a record 39 days.<ref name="Hull_centenary">{{cite book | author=Hull|first= Crispin | chapter= Major Cases |title=The High Court of Australia: Celebrating the Centenary 1903–2003 | publisher=Lawbook Co. | year=2003|isbn=0-455-21947-8 |url=http://www.crispinhull.com.au/high-court-book/chapter-two-major-cases-1/}}</ref> The summary of the parties arguments occupies 143 pages of the Commonwealth Law Report.<ref name="76 CLR 1"/>{{rp|at pp. 7–149}} A number of arguments were put to the Court, most of which were rejected.

However the Court declared the law invalid on four grounds, albeit by different majority of judges:<ref name="Hull_centenary"/>
*Section 92 of the Constitution,<ref name="s92">{{cite Legislation AU|Cth|act|coaca430|Constitution|92}} Trade within the Commonwealth to be free.</ref> in providing that "trade, commerce, and intercourse among the States ... shall be absolutely free." conferred a positive right on the banks to engage in the business of interstate banking.<ref name="76 CLR 1"/>{{rp|at pp. 388}}
*it involved the acquisition of property that was not "on just terms, contrary to section 51(xxxi) of the Constitution.<ref name="s51(xxxi)">{{cite Legislation AU|Cth|act|coaca430|Constitution|51}}(xxxi) "The Parliament shall, subject to this Constitution, have power to make laws for ... the acquisition of property on just terms ...".</ref> The problem with acquisition arose out of the Act's sections detailing the appointment of new directors for all private banks with the power to control, manage, direct and dispose of assets of those banks. Dixon J held that this was a "circuitous device to acquire indirectly the substance of proprietary interest."<ref name="76 CLR 1"/>{{rp|at pp. 349}}
*The Act, in setting up a "Court of Claims", invalidly attempted to oust the [[section 75 of the Constitution of Australia|original jurisdiction of the High Court]].<ref name="s75">{{cite Legislation AU|Cth|act|coaca430|Constitution|75}} Original jurisdiction of High Court.</ref><ref name="76 CLR 1"/>{{rp|at pp. 368}}

== Privy Council decision ==
{{Infobox Court Case
| name = Commonwealth v Bank of New South Wales
| court = [[Judicial Committee of the Privy Council|Privy Council]]
| date decided = 26 October 1949
| imagesize = 100
| full name = 
| citations = {{cite BAILII|court=UKPC|year=1949|num=37|format=1|parallelcite=[1950]&nbsp;[[Appeal Cases Law Reports|AC]]&nbsp;235}};<br>{{cite AustLII|UKPCHCA|1|1949|parallelcite=[https://eresources.hcourt.gov.au/showbyHandle/1/13746 (1949) 79 {{abbr|CLR|Commonwealth Law Reports}} 497]}}
| transcripts = 
| prior actions = 
| appealed from = [[High Court of Australia]] (''see above'')
| opinions = * The Board did not have the jurisdiction to hear the case, as it potentially involved "inter se" matters as described in [[Section 74 of the Constitution of Australia|section 74 of the Australian Constitution]]
* In [[obiter]]: section 92 of the Constitution protects an individual right to freely trade inter-state. The test to determine if a direct burden on trade is merely regulatory will turn on both legal and "political, social or economic" factors.
| judges = {{plainlist|
* [[Samuel Porter, Baron Porter|Lord Porter]]
* [[Gavin Simonds, 1st Viscount Simonds|Lord Simonds]]
* [[Wilfrid Normand, Baron Normand|Lord Normand]]
* [[Fergus Morton, Baron Morton of Henryton|Lord Morton of Henryton]]
* [[John MacDermott, Baron MacDermott|Lord MacDermott]]}}
| number of judges = 5
| Superseded = [[Cole v Whitfield]] (1986) (in relation to section 92)
| subsequent actions = 
}}

In appealing the decision to the Privy Council, the Commonwealth adopted a deliberate strategy of limiting the grounds of appeal to avoid seeking a certificate from the High Court under [[Section 74 of the Constitution of Australia|section 74 of the Constitution]].<ref name="s74">{{cite Legislation AU|Cth|act|coaca430|Constitution|74}} Appeal to Queen in Council.</ref><ref>{{cite web |author1=Gowans, G. |author2=Menhennitt C.I. |author3=Phillips P.D. |author4=Tait, J.B. |date=18 August 1948 |title=Opinion No. 1833: Re Banking case judgements |url=http://legalopinions.ags.gov.au/legalopinion/opinion-1833 |via=Australian Government Solicitor}}</ref><ref>The High Court only once granted a s 74 certificate, in {{cite AustLII|HCA|94|1912|litigants=[[Colonial Sugar Refining Co Ltd v Attorney-General (Cth)]]|parallelcite=[http://www.austlii.edu.au/au/cases/cth/HCA/1912/94.pdf (1912) 15 {{abbr|CLR|Commonwealth Law Reports}} 182]}}.</ref> The case was argued for 37 days before the Privy Council, one of the longest in its history, during which two of the Lordships assigned to the case ([[Lord Uthwatt]] and [[Lord du Parcq]]) died.<ref>{{Cite book |last=Priest |first=Susan |url=https://www.worldcat.org/title/ocm48195157 |title=The Oxford companion to the High Court of Australia |last2=Williams |first2=George |date=2001 |publisher=[[Oxford University Press]]|isbn=978-0-19-554022-2 |editor-last=Blackshield |editor-first=Anthony |location=Melbourne : New York |chapter=Bank Nationalisation Case |oclc=ocm48195157 |editor-last2=Coper |editor-first2=Michael |editor-last3=Williams |editor-first3=George |chapter-url=https://www.oxfordreference.com/display/10.1093/acref/9780195540222.001.0001/acref-9780195540222-e-29 |url-access=subscription}}</ref>

The Privy Council endorsed the High Court decision in adopting the individual rights approach. Provisions of the Commonwealth law prohibited private banks from carrying out interstate business banking. Interstate banking transactions under the law were thus not "absolutely free" and hence in violation of Section 92 of the Constitution. The Law Lords held that a simple legislative prohibition of interstate trade and commerce would be constitutionally invalid, but a law seeking to regulate or prescribe rules as to the manner of trade and commerce would not necessarily be in breach of section 92. The Board noted that the question of whether a law was merely regulatory or unduly discriminatory "will often be not so much legal as political, social or economic. Yet it must be solved by a court of law."<ref>''Commonwealth v Bank of New South Wales'' (1949) 76 CLR 467, 639.</ref>

Additionally, while rejected this nationalisation by the government, the Board left the door open to future takeovers where "on its own facts and in its own setting of time and circumstances ... prohibition with a view to State monopoly was the only practical and reasonable method of regulation".<ref>''Commonwealth v Bank of New South Wales'' (1949) 76 CLR 467, 641.</ref> 
[[File:ChifleyEvatt.jpg|thumb|261x261px|[[Ben Chifley]] (centre) with [[Herbert Evatt]] (left) and [[Clement Attlee]] (right) at the Dominion and British Leaders Conference, London, 1946]]

==Aftermath==
At the [[1949 Australian federal election|1949 federal election]] the [[Chifley government]] lost power, ostensibly due to the problems regarding this legislation and the Court case.<ref>{{cite news |url=http://nla.gov.au/nla.news-article187347964 |title=A policy backed by a mandate |newspaper=[[The Age]] |date=23 February 1950 |page=2}}</ref>

This particular understanding of s 92 would remain highly influential, until it was overturned in favour a free trade interpretation in ''[[Cole v Whitfield]]''.<ref name="165 CLR 360">{{cite AustLII|HCA|18|1988|litigants=[[Cole v Whitfield]]|parallelcite=(1988) 165 [[Commonwealth Law Reports|CLR]] 360|date=2 May 1988|courtname=auto}}.</ref>

==See also==
* [[Constitutionalism]]
* [[Constitutional economics]]
* [[Political economy]]
* [[Rule according to higher law]]
* [[Australian National Airways Pty Ltd v Commonwealth]] (1945)

==References==
{{reflist}}

[[Category:High Court of Australia cases]]
[[Category:Australian constitutional law]]
[[Category:Freedom of interstate trade and commerce in the Australian Constitution cases]]
[[Category:Acquisition of property in the Australian Constitution cases]]
[[Category:Corporations power in the Australian Constitution cases]]
[[Category:1948 in case law]]
[[Category:1948 in Australian law]]